Why Apple Will Double From Here

31 | By Michael A. Robinson

I have such an intense enthusiasm for Apple Inc. (NasdaqGS: AAPL), that my collection of the company’s products sounds a lot like the lyrics of a famous Christmas song: Five iPhones, four wireless routers, three MacBooks, two Apple TVs and one pair of iPads.

And while my love for the company’s products is great, and would certainly be a factor, I can assure you that my analysis of the profit potential posed by Apple’s stock will be like any other recommendation I make – completely objective.

But with a polarizing “cult” stock like Apple, that’s clearly not a claim that every analyst can make. You see, when I compare the current bull and bear stock-price predictions for Apple, I feel as if I’m reading about two completely different companies.

With Apple, it seems, there’s no middle ground.

This intense disagreement is actually one of the factors that have been holding down Apple’s share price. Coming, as it does, on such a high-profile stock, the tug-of-war between the opposing camps plays out in the headlines each day. And it’s causing so much confusion – and outright frustration – that most potential Apple investors are sticking to the sidelines, and are choosing to ignore the stock altogether.

That’s unfortunate … because this stock is actually one of the most intriguing profit plays that I see right now – a big-name brand in turnaround mode, and a tech stock that poses less-than-average risk.

And as profit opportunities go, this is a big one.

I see two major catalysts here that are perfectly positioned to drive the stock higher.

Indeed, this has the double-your-money profit potential that we target for you here at the Strategic Tech Investor.

And when this stock rallies, the folks who listened to the bears will realize they’d been suckered.

A Tough Assignment

Sometimes it really stinks to be the guy who replaces a legend.

Jeffrey Immelt had to do it when he succeeded Jack Welch at General Electric. Heartley William “Hunk” Anderson had to do it when he followed Knute Rockne as head coach at Notre Dame. And current Apple CEO Tim Cook had to do it by taking over for the late Steve Jobs, the Apple co-founder who later came back and turned the struggling firm into a consumer-gadgets powerhouse.

Under Cook, Apple has seen its stock price plummet from the all-time record closing high of $705 a share set back in September 2012. In recent months, as the company continued to struggle, the buzz was that Cook was in well over his head.

I don’t agree.

I keep a sharp eye on Apple and I think Cook is doing about as good a job as anyone could be expected to do after succeeding a legend like Jobs.

Jobs knew how to create products that could get hard-bitten tech veterans like me emotionally involved with machines in a way that few business leaders ever have.

Candidly speaking, no CEO I can think of could truly replace Jobs. Maybe Elon Musk, the role model for the “Ironman” movie franchise. Though brilliant, Musk is not an iDevice expert and he’s a little tied up right now running Tesla Motors Inc. (NasdaqGS: TSL).

And now there are signs that Cook is winning Wall Street over. At a recent price of $505, Apple’s shares have already recovered 29% of its value from the closing low of $390.53 reached back on April 19.

The reason why I wanted to talk with you about Cook’s tenure is this subject is an aspect of the five rules I’ve created to generate tech-investing wealth.

Rule No. 1 says “great companies have great operations.” And great operations almost always start with leadership. Having analyzed Apple’s performance during Cook’s tenure, I believe the firm meets this rule’s mandate.

Cook is also focused on improving value for the shareholder. Besides achieving high profit margins, he has set aside $100 billion for dividends and stock buybacks.

A Powerful Start

At the end of the day, a corporate CEO is no different than a baseball team manager or an NFL head coach.

They get judged on results.

And lately Cook’s been getting some pretty good ones.

Take the two new versions of the iPhone that the Silicon Valley pioneer recently released.

Apple sold a record-breaking 9 million new iPhones during their recent introductory weekend. Those sales figures swamped the forecasts of industry analysts who had predicted unit sales of 5 million to 7 million.

The market research firm Localytics estimated that more than 75% of the launch sales were for the follow-on iPhone 5S model, with the remainder going to the much-maligned, plastic-cased 5C.

The 5C did pretty well in the U.S. market following its rollout. And those decent results flummoxed Apple’s skeptics. You see, the 5C was supposed to be a “cheap” version of the regular iPhone, which has an aluminum case.

But now Apple has already found that its customers are flocking to the higher-priced (and higher-profit-margin) iPhone 5S, so it’s already cutting back production orders for the plastic-housed phone.

But the 5C served its purpose: It allowed Apple to ramp up enough supply to avoid any shortages that would have robbed the company of sales and sparked customer and investor angst at a key juncture in the firm’s post-Jobs period.

And the migration to the costlier phone helped preserve Apple’s profit margins – enough so, in fact, that heartened Wall Streeters sparked a surge in the company’s share price.

The iPhone, in other words, has recovered some of its “iconic” status.

And it looks like the company has, too.

A Billion Here, a Billion There

Although the successful iPhone launch has added some oomph to the Apple-share-price rebound, there was an earlier catalyst that first gave the stock its northward launch.

I’m talking about the “Icahn Hug.”

In mid-August, heavyweight investor Carl Icahn revealed in a Twitter “tweet” that he’d taken a $1 billion stake in Apple and would be pushing Cook to further improve the stock price.

The two men recently had a dinner meeting at Icahn’s New York apartment that last lasted four hours. Icahn says he was blunt in giving his reasons why he wants Cook to commit to buying back another $150 billion worth of Apple stock.

A former corporate raider and “green mailer,” Icahn has more recently recast himself as an “activist investor.” And while he doesn’t win every battle, when he does emerge victorious, his fellow shareholders often nominate him for sainthood.

Take the case of Netflix, Inc. (NasdaqGS: NFLX). Sensing hidden value in the online streaming service, Icahn took a stake back in September 2012 when the stock was trading at less than $60 a share.

At the time, some analysts said Icahn was crazy. Well, NFLX recently closed at about $300 a share – a gain of 400% in just over a year.

If Icahn were to work the same magic on Apple, we’d be looking at a share price of $2,460 a share.

But as you folks know, I tend to be very conservative with projections of this type. If Icahn were merely one-fourth as successful with Apple, we’d still be looking at a gain of 100% increase from here.

Poised to Double

And Icahn isn’t the only famously shrewd investor who’s convinced a rebound in Apple shares is at hand. Both George Soros and Leon Cooperman have said that they’ve moved into the stock – taking stakes of roughly the same magnitude as Icahn.

And Icahn subsequently reported that he’d further increased his stake in Apple.

But even without Icahn, Soros and Cooperman in the mix, Apple meets Rule No. 5 of my system: It has the power to double all on its own.

With a market cap of nearly $450 billion, Apple has an earnings-per-share (EPS) growth rate over the past three years of 52%, meaning profits would roughly double in about 18 months.

If the stock simply traded at its current Price/Earnings (P/E) multiple of 12, which is a 20% discount from the overall market, that alone could justify a 100% gain for the stock (getting you to $980 a share). But if the P/E matched the market’s rate of 15, the stock would trade even higher – perhaps trading as high as $1,175 a share.

Catalysts Aplenty

Usually when I’m analyzing a stock – and forecasting a possible stock price target – I can cite one, or even two, catalysts that I believe could help drive the share price higher.

With Apple, though, there are at least three major catalysts that are poised to make this stock a big winner. They are:

  • Breakout products: With the successful iPhone 5S launch in the books, the company can look forward to an expected iPad launch this month, and subsequent rollouts of its rumored iWatch and Apple TV products to create additional “buzz” around the stock.
  • Activist investors: In addition to Icahn, Soros and Cooperman, mutual fund legend Bill Miller has been working to “jawbone” the stock higher. And Icahn has made it clear that he’s going to aggressively push for buybacks and other shareholder-favoring moves.
  • Strong fundamentals: Although the stock is cheap on a valuation basis, the increasingly vocal support from activist investors and placating moves by the company should combine with rising profits to push this stock higher.

In our weekly talks here we’ve often talked about “special-situation” stocks that are in a unique position to deliver some potentially heady gains.

Apple is in just that spot.

It’s a classic corporate turnaround in the making. But it’s more than that: Despite what many Wall Streeters and other market mavens would have us believe, Apple’s growth days aren’t over yet.

When I say that the road to wealth is paved with tech, Apple is exactly the kind of company I have in mind.

[Editor’s Note: Thanks for the comments, concerns and interests that you continue to share. It helps to know what you’re thinking about. Our publisher likes to see them: The more interest he sees from you folks, the more resources we’ll be able to devote to this newsletter. So by all means please keep the comments coming.]

31 Responses to Why Apple Will Double From Here

  1. G13man says:

    how do we Know that Ichan will not us these positions to his benifit vs the share holders of either of these companies , what with the possibilities of I-stream audio& video

  2. Cato Sandberg says:

    When Cook took over I sent him a note saying his buy-back had to be balanced against stock price so that the did not go much lower than where it was or he would be sitting on a pile of money without any friends. I am pleased to announce now that I am one of his friends and a am already sitting on the pile with him. He has been good and I hope he will run a tight ship.

    • Michael Robinson says:

      Hi Cato,

      That’s great news on your investment. I wish you all the luck in the world. Who knows, maybe Cook read your note and took it to heart.



  3. Gary Nelson says:

    Do you recommend an option on Appl as a couple hundred shares and the 18 months will tie up most of average traders capital for quite a long period and leave nothing for other opportunities and also put all your eggs in one basket. If you do have another play what strike and date etc.?
    Also Stm good news yet its sinking I’m down 9% when do we cut our loss, or double up?
    Thank you, Gary

    • Michael Robinson says:

      Hi Gary,

      Thanks for touching bases with me. Much appreciated. Let me stick with Apple as a topic for this comment. Strategic Tech Investor really isn’t set up to address options. We’re much more oriented toward the fundamentals of tech for the average retail investor. If you do plan on buying Apple calls, I wish you the best of luck.

  4. lola says:

    I have always enjoyed reading your analyses of stocks/ETFs. Your logic is
    credible. While I have not always bought your recommended stocks, those I
    bought have been appreciating in price. I think you make a very sound analysis
    for Apple. I like the fact that the smart investors like Icahn, Soros and Cooperman are in the game. THANK YOU FOR YOUR INSIGHTS.

    • Michael Robinson says:

      Hi Iola,

      Thanks for writing to me and for the nice comments. Clearly, some very savvy pros see a lot of upside in Apple. Hope you make a lot of money.

      Cheers and best wishes,


  5. Jeff Pluim says:

    Your comments on Apple seem accurate. And I believe that Icahn made a good move to buy into Apple. There is good opportunity for Apple to pay good returns and the stock will rise with the redemption of outstanding stock. Netflix however, is a completely different story. There is absolutely no value in this stock. You can like the product that Netflix delivers but the business/investment model sucks. There is never any chance of Netflix paying a dividend and the company has a negative book value of over $700 million. With a price/earnings ratio over 410, shareholders are paying over $330 per share for a $700 million debt. This company has no hope of ever paying its shareholders a decent return. The only reason that the stock has soared is because, and only because, Icahn bought into the company. It would not surprise me one bit if Icahn has a short derivative position on his Netflix stock. When he pulls the plug and the stock starts to fall, he will make a ton of money.

    • Michael Robinson says:

      Hi Jeff,

      It’s great to hear from you. You have obviously studied Apple and Netflix in detail, and I think that’s great. Always pays to do your homework. In a situation where a tech stock — really any growth equity — has ramped up very quickly, remember to protect those profits with trailing stops. That way no matter what goes wrong, you still get out with money in your pockets. Hope that helps.



  6. Bill Mansvelt says:

    Thankyou for the most informative review. The fundamentals of Apple are so astounding when you compare it to others. It has amazed me that so much negative sentiment could be generated by predictions that it would cease to generate innovative revolutionary products and would fall behind other products of far less innovative companies. You have spotlighted the emotional factor brilliantly and given us all a welcome reality check in the face of negative sentiment that can be so easily generated when an iconic figure like Steve Jobs is no longer part of the team. A GREAT POST!

    • Michael Robinson says:

      Hi Bill,

      Thanks for the nice comments and for taking the time to post them. You make a good point about all the (overblown) negativity attached to Apple in the immediate post-Jobs era. The company is still fundamentally sound, makes great products and has high profit margins. What’s not to like about all that?

      Cheers and best wishes,


    • Michael Robinson says:

      Hi John,

      Please take a moment to read the post above regarding options. That’s not something I get into here at STI. But thanks for reading the column and posting a comment. Much appreciated,


  7. Wily Willy says:

    Okay, I’ve had it! Mentally I have been following—- not buying, just thinking —- should I buy the most expensive stock I have EVER bought in —-many more years than I like to think about. I know, I know — just commit to a smaller quantity and drop a couple of zeros and smile.

    Your dang-blasted write up on AAPL did me in today. I closed my eyes after entering the option I chose and clicked “enter”. [I’ll leave the larger stock purchases to Carl Icahn whom I met years ago at his brokerage company where I traded a bit — I’m sure he wouldn’t remember me — but, I should have stuck with him!]

    I will not hold you to doubling my AAPL purchase in due time — but, it would be loverly [per Mr. Doolittle]. I hope this involvement with Apple is better than the danged iphone 4S that is the worst, “rotteness” phone I have ever owned — and my list of phones goes back to Qualcom’s earliest unit with Sprint’s “San Diego Plan” where I lived in LaJolla a mile or so from Q’s location.

    • Michael Robinson says:

      Hi Wily,

      Well I must say you are rather witty, and I appreciate your taking the time to write to me. I wish you the best of luck with Apple. Personally, I skipped the 4 altogether and went for the 5, which I love. I still have a 3 something that houses my digital music collection and plays 18 hours a day. In fact, I can hear Pandora’s Chill station in the background as I write this. Good luck with all your investments.

      Cheers and best wishes,


  8. Steve Graves says:

    I wonder what time frame may be required to reach your rosy target of 100%? The answer to this question makes a considerable difference in tactical planning. If capital is tied up in AAPL, it’s fallow until AAPL begins to move.

    • Michael Robinson says:

      Hi Steve,

      That’s a great point. And one I have thought about often in this market. Fact is, there are always going to be stocks that do better or worse than the ones we investors decide to buy. It goes with the territory.

      For that reason, I always recommend that investors buy the stocks that meet their individual profiles, time horizons and risk tolerances. No two investors are exactly alike in those matters.

      Having said that, how quickly Apple can double will depend on how well it meets its milestones and makes its numbers. The math I used in the column indicates it could double in the next three years.

      Remember, however, in this market, stocks can move up very quickly once they turn. My best guess at this point is that it won’t be a straight line to the top but will come in several different moves up. I hope that helps.

      Cheers and best wishes,


  9. stephen f says:

    do you think Apple will buy VHC or end up paying them a lot of money for infringing on their patents? I did like your article on Apple.

    • Michael Robinson says:

      Hi Stephen,

      Thanks for taking the time to write to me and post your comments. I appreciate the support. At this point, I can’t really offer an opinion on patent infringement cases. Fact is, there are a lot of them out there these days. In most cases, they don’t end up having a dramatic impact on the growth or profitability of a firm like Apple. Hope that helps.

      Cheers and best wishes,


  10. Leo Lauterbach says:

    Do not forget new markets for their existing products. First and foremost is China Mobil… but, there are still other telecom companies that have yet to sign on… mainly they need access to a 4G network…

    • Michael Robinson says:

      Hi Leo,

      Great point. The world is going mobile and lots of new markets await. Billions of people out there have yet to get true smart phones. So, Apple is looking at a huge global trend that will last several more years at a minimum.

      Cheers and best wishes,


    • Michael Robinson says:

      Hi Paul,

      Thanks for reaching out to me. However, I’m not really able to talk individually with investors because I am not a registered broker dealer. You can try reaching me through customer service but again, I am not able to make individual comments or offer personal advice or suggestions. For that reason, it would be better if you posted your question here. I hope that helps.



  11. TBIRD48 says:

    You are so right on. Thanks for all the research and comments/postings that you do. I have learned that you are pretty much right on the mark with what you are thinking and sharing with us. Thank you.

  12. William L says:

    Your comment on rule no.1 operations are key to companies, which is true for most traditional companies especially CPG companies. And Cook is a supply chain operation guy whom I am sure will do well to keep costs and inventories low and profits high in Apple.

    However, Apple is a “fashion” type of companies which depends solely on innovations and the industry it is making most money out is Mobile and Mobility Devices like ipads. In the past, most of its revenue comes from ipods but since the industry is moving consumers into phones, tablets, phablets etc. The majority of its revenue comes from phones and tablets.

    In this industry, there is only 2-3 big winners which probably eats up 80% of the market and the remaining 20% is then share among the other small players which it is cruel but it is a reality fact of life.

    The period of the traditional phone market where Nokia. Ericsson, Sony dominates in the past is over, period. Today, the market is moving at a super fast speed and converging all the tech gadgets for people like digital camera, mobile phone, small computer, music etc are all converging into 1-3 products which most people will carry. So it is a smartphone probably 5″ or less or a phablet and a tablet.

    Look at those giants which I have mentioned and even niche player like Blackberry couldn’t survive this gush of new frontier. Even Sony had to move fast into this space and drop its own symbian products as it is totally outdated by Androids and iphones.

    Without Steve Jobs who is the main soul and innovator in Apple, apple will be lacking of innovation and will just continue to milk whatever success and innovations Steve has left in the company till it runs dry.

    Moroever, Apple used to be the leader in this space giving much innovations, but today look at Google and Samsung and other Android players, they are already surpassing Apple in terms of new innovations.

    I don’t think Apple will be able to recover back its glory days when its stock hit the high almost $800. However it will continue to be one of the top end players, in fact a niche player of its own just like what happened to the iMacs and iBooks. It will never command a large market share like what it is still having in ipads and iphones and will slowly dwindle down to be a niche high end player.

    • Michael Robinson says:

      Hi William,

      Thanks for such a thoughtful comment. I appreciate your taking the time to contact me and post your comments. You make some great points about the dynamics of tech markets and how quickly they change these days.

      Also, no one can truly replace Jobs. However, I still like Apple under Cook. At this point it’s all about execution. To your larger point, however, no one can predict what the next disruption will be or where it will come from. And there’s no guarantee that if Jobs were still with us he would have the right answer, either. Remember, he was forced out once for reason and Next never really went anywhere.

      Hope that helps,


    • William Patalon III says:

      Dear Reg:

      Thanks for the comment … it’s a good one. Obviously with a report like this, it’s not possible to cover every single aspect of a company’s business. However, we have covered this topic in detail in our Apple research in Private Briefing, the sister service that I run here at Money Map Press. And Michael and I talk every day, and have discussed the China connection in great detail.

      Apple considers China to be a crucial market. In fact, when it rolled out its new iPhone 5 products recently, it made a point of holding an “event” in Beijing, as well as in Cupertino. China is very brand aware, in terms of the consumer market there, and Apple is a prized brand. That said, the company has been losing share there due to Samsung (and domestic brands) expanding their product lines and broadening their product price points.

      Apple has created the 5C product partly for these markets (China, Greater Asia, and India), and has also continued production of the earlier iPhone 4 series, which it now positions as a bargain product. In the meantime, the company is also working to strike more-advantageous deals with carriers in China, something that remains “in process.”

      The company needs to step up its game in China, but CEO Tim Cook has specifically made note of this, so we believe Apple will continue to push its brand and market position in that market.

      Hope that helps a bit.

      Respectfully yours;

      William Patalon III
      Executive Editor
      Money Map Press LLC

  13. Anthony Cortese says:

    Michael Robinson, I want to say you are the best. You give us the information
    we need to make are picks and your information is simple and clear. I have been receiving investment for about 3 years and I just found you about 6 months
    ago and thank GOD. I wasn’t happy with any of them, they tell you a good fairy tail, you sign up and they go on vacation on your money. I don’t have much money but I think I will very soon following your recommendations.
    Respectfully yours,
    Anthony C

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